Why Blackrock's proposed spot crypto ETF plan is a step closer to adoption

Why Blackrock's proposed spot crypto ETF plan is a step closer to adoption

For a moment it appeared that regulators were ready to acknowledge what many investors and financial institutions see as inevitable - the rise of cryptocurrency as a legitimate, mainstream investment vehicle. And we still may be in that moment.

Several financial powerhouses, including Blackrock, have asked the SEC to provide financial products that focus on crypto. Blackrock proposed a plan to offer the first spot ETF for Bitcoin, allowing investors to simply trade the cryptocurrency based on its current value instead of just the futures trading on Bitcoin that the federal agency approved in 2021.

Although Blackrock filed only one plan, after reports that the SEC saw the plan as inadequate and 'not sufficient clear and comprehensive, Blackrock refiled this week with a fresh plan. This shows determination and is a major part of the reason why some experts believe the SEC's failure to approve Blackrock's plan is significantly different from previous rejections. The agency has said it will eventually approve the proposal, but there is now a belief that it will be approved by the end of the year.

This is at least the 30th crypto spot ETF plan that the SEC has turned down, according to Bloomberg, and there are a growing number of voices, even within the agency itself, who say that the regulator is running out of excuses on such approvals. The fact that financial institutions like Blackrock and Fidelity are seeking approval for such plans is an indication that the time for crypto to go mainstream has come to an end. Even among long-established institutional investors, the cryptocurrency genie is out of the bottle, and regulations are going to have to acknowledge that.

The market definitely feels the time has come. The value of Bitcoin rose in June, topping $30,000 for the first time in a long time, before falling in light of the SEC decision. But the applications keep coming; at least three other issuers have filed similar ETF plans since BlackRock's filing, Bloomberg said.

Firstly, analysts believed that Blackrock had a good chance of getting the offer approved by the SEC, especially given its nearly flawless record for ETF approvals. Blackrock's plan addressed most of the problems that the agency had raised in dozens of previous applications by other firms offering plans for spot crypto trading that were rejected, such as the speculative and potentially manipulative aspect of some crypto trading platforms. The Blackrock plan puts the NASDAQ in charge of ensuring transparency in trading.

SEC regulations are, of course, concerned about investor safety, and experience has shown that an unregulated crypto market could lead to investor tragedy. At the same time, regulatory authorities must acknowledge the unique features of crypto, such as its independence, digital nature, which attracts people to use it. The monetization of crypto into a digital currency is not going to help anyone or advance financial innovation.

Crypto trading, a potential engine of economic growth, could be driven by the heightened interest in crypto by traditional finance institutions and markets, as crypto trading could be a significant gamechanger for the sector. An ETF offering would convert crypto to a suspect, outlier method of moving money under the radar into a 'legitimate' asset. For it to happen, crypto must retain its ethos of being a purely digital way of exchange, unencumbered by unnecessary regulations.

Opening the Door for Crypto growth and financial innovation

If it happens, other features of cryptocurrency will become evident, including the ability to settle both domestic and international accounts without the burden of exchange rates, bank transfers, and regulatory paperwork. You can be sure that crypto assets transferred from Blackrock accounts will be vetted as thoroughly as dollar transfers.

As people become more skilled at investing in crypto, they will be more likely to use crypto, fulfilling the original promise of cryptocurrency as a pure, digital method for settling debts, buying and selling, and transferring assets in a safe, efficient manner. As more people take advantage of cryptocurrency, more advanced tools will be developed - based on AI and other advanced technologies - to enable users to make the most out of their investments.

The immediate problem is the SEC's approval of spot crypto trading and the market demand for it. The people looking to trade these assets are not interested in theethos of cryptocurrency, they're interested in making money, and they've determined that there's a lot of money to be made by providing services for crypto trading.

This acknowledgement by some of the largest and most established players of the financial sector of the potential of crypto is exactly the reason it is not going away. With proper control over market manipulation, there's no reason to take crypto away from other traded assets. Cryptocurrencies can, for the first time, become clear to all investors.

By Dmitry Gooshchin, COO and co-founder of Endotech.io.